Making Cents: Knowing when enough is enough

I’M NOT sure if you’ve ever heard of Rajat Gupta but long story short, he was born in Kalkuta, India in 1948, orphaned in his teens, but in his 40’s became CEO of McKinsey which is one of the world’s most prestigious consulting firms in the world.
In 2008 he was reportedly worth $100m.
Four years later we was convicted of insider trading and spent two years in jail.
You might ask, how could a man who was a multi-millionaire, who had enough resources to do anything he wanted to, end up in jail?
And the answer is simple.
The millionaire wanted to become a billionaire.
You’ll certainly have heard of Bernie Madoff who we know created the biggest Ponzi scheme ever.
He was quite similar to Gupta.

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Because before he tricked investors out of c. $64.8 billion, he was a very successful and legitimate businessman who was reported to have been making between $25m and $50m per year.
The problem with Madoff and Gupta was that they were multi-millionaires who socialised with multi-billionaires, so when they compared themselves with others, they never felt they had enough. And when that happens you could end up making seriously bad decisions.
The problem with most people is that they think they are less well off than what they actually are, and they don’t realise how good they are.
And that’s because they can think of a person who they believe has more wealth than them. But that person can also think of someone who is wealthier than them. We can all point to someone else where we can say, they’ve got more money than I do. Up until recently, no one but Jeff Bezos could say that, but now he has to say Elon Musk has more than him.
Phil Jones is a Manchester United defender and supposedly earns £75,000 a week.
An insane amount of money and if he was to compare himself to what the majority of people earn, he would feel incredibly rich, he’d have to.
But if he’s comparing his income to that of his teammate, Mr. Ronaldo, who earns £515,000 per week, he might feel very poor.
And Mr. Ronaldo might feel the same if he compared his annual salary to the top hedge fund managers in the world.
For example, Mr. Richard Mashall, came 15th in the top paid hedge fund managers list for 2021, with earnings of $247 million.
Ronaldo’s Manchester United salary was £26.5 million.
Ronaldo’s Man U salary wouldn’t get him a place on the hedge fund managers C teams subs bench.
My point being is that there will always be someone you can point to who has more than you, but that’s okay, that doesn’t mean they are any happier or more successful. We shouldn’t measure success by what it says you have on a bank statement. I’d say accept that what you have might be enough for you, even if it’s less than others.
And I say that because if you want to catch up with others, it could push you to making mistakes and making decisions that you may later come to regret.
You might look back and think, the amount I had was fine, and then I started taking risks with investments, started buying more property, borrowing more etc. what was I doing and what was I thinking?
It’s hard to stop when others are doing it and maybe they are being successful and you’re seeing their wealth grow and you don’t want to miss out on that.
A client of mine had a very big pension fund and he reached that point where its size was more than enough to pay him the income he needed for the rest of his life, where he’d never have any fear of ever running out of money.
But he wanted more.
And I couldn’t understand this because even if his fund increased in value, any extra money was money he couldn’t spend. If he locked in his fund where it was at, he’d be absolutely fine, but here’s the thing, if the fund went down in value by 10%, it would put back his retirement plans by 2.5 years.
I told him the risk he was taking was that if markets went against him, he’d have to work an additional 29 months to make up the amount he could lose.
When I put it to him this way, he knew he had enough.
I came across another individual who wasn’t a client but he seemed to be obsessed with finding the next Tesla or a big cryptocurrency win.
But again, he didn’t have to.
And it would be fine if he was investing monies that he could afford to lose, but he wasn’t, he was investing big money. And he didn’t need to because he had excellent savings and had a high monthly saving rate. He didn’t need to be hitting 40% returns and he certainly didn’t need to be hitting -40% returns either.
He was putting what money he had and needed at risk for something he didn’t have and probably didn’t need. And when you start risking things that are important to you for something that isn’t, or you’re just doing it to catch up with what you think others have, that just doesn’t make sense.
I could give you many more examples, and one quickly springs to mind of a property developer that I knew of, who was doing really well but he wanted more. And if you ask anyone like him, what was their end, I’ve enough walk away number, I’d say they couldn’t give you one.
And maybe that was a lack of financial planning on their part. They probably get so busy with work that taking time out to look at their finances wasn’t on their priority list, and they probably thought why should it be, when things are flying for them.
Anyway, it seemed he’d never have enough and then the crash happened and not only did he lose all his money, but he lost his home, his wife, and his kids as well. Keeping your reputation and family intact is knowing when its time to stop taking risks that might harm them and you. And that’s knowing when you have enough.
And I guess the lesson is that we all should know what our enough number is. We should have an enough mortgage number, enough debt number, enough net worth number, enough salary number, enough protection number, enough pension number, enough risk number and so on.
If you don’t know, I’d say get help, and find out what they are, because everyone should have their enough numbers and it’s not that difficult to calculate if you know what you’re doing and looking for. Not knowing, could mean you either end up lucky or full or regret if things don’t go your way.
Sometimes we need to accept that what we might have is enough, even if it’s less than others around us. And some might think adopting this approach will mean you’re leaving opportunities behind you and perhaps you will, but when you reach that point when you have enough for you, pushing for anything more could push to that point of regret I’ve referred to.
I’ll finish up with something Shane Lowry said which I thought was just great.
He said, he feels privileged to have earned enough money to support his family and give them a life he never thought possible from hitting a small white ball around fields.
He said, he’s happy with what he’s got, and what a great thing to say.
He’s not chasing money by moving to a different tour, and he probably never chased money, it was just a consequence of being so talented. He’s chasing tournament wins and I hope he has plenty more of them because he deserves everything he gets.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie